'll 


h, 


Eiemptions  of  Manufacturing  Plants 
FROM  Municipal  Taxation. 


Exemptions  of  Manufacturing  Plants 
FROM  Municipal  Taxation. 


BY 

ALFRED  S.  NILES, 

BALTIMORE,  MD. 


Compliments  of  the 

OHIO  STATE  BOARD  OF  COMMERCE, 

Board  of  Trade  Building, 

Columbus,  Ohio. 


PUBLIC  POLICY  PUBLISHING  CO., 
132  Market  Street, 

CHICAGO. 


• 

Jj 


CONTENTS. 


The  Significance  of  Business  Men’s  Organizations 2 

Taxes  Take  One-half  of  the  Annual  Return  on  Capital. ...  3 

The  Problem  Defined 7 

Growing  Industries  

Practical  Benefits  from  Exempting  Manufacturing  Plants 
from  Municipal  Taxation  10 

Municipal  Competition  for  Manufacturing  Plants,  Popula- 
tion, Wealth j- 

In  Favor  of  Abolishing  the  Taxation  of  Personal  Property.  17 

Taxes  Payments  for  Benefits 20 

Exhortation  to  Action 21 


■ 


x> 


.y;— X-  . 

^'r . 


/ a.' 


'“  ^V.  • ^ , 'S.f'~  ,r-  - ^ 

mmsmbi 


EXEMPTION  OF  MANUFACTURING  PLANTS 
FROM  MUNICIPAL  TAXATION/ 


BY  ALFRED  S.  NILES^  ATTORNEY^  BALTIMORE^  MD. 


Mr.  President  and  Gentlemen: — This  dinjier,  given 
by  the  five  commercial  organizations  of  Detroit,  is  itself 
a fact  that  I think  may  inspire  in  all  of  us  profound 
satisfaction. 

To  those  who  have  healthy  appetite  and  good  diges- 
tion it  is  quite  unnecessary  to  point  out  the  primary 
and  most  obvious  reason  for  our  post-prandial  feeling 
of  benevolence  toward  all  mankind. 

I come  from  the  land  of  good  living.  My  home  is 
that  city  of  which  the  autocrat  of  the  breakfast  table 
averred  that  it  was  the  gastronomic  center  of  the  uni- 
verse, and  that  its  far-famed  monument,  instead  of 
bearing  upon  its  shaft  the  statue  of  Washington,  should 
have  been  crowned  with  a mighty  oyster,  surmounted 
by  a canvas-back  duck. 

But  westward  the  star  of  empire  takes  its  way,  and  if 
this  be  a fair  sample  of  your  powers,  the  Baltimore 
chef  will  have  to  look  to  his  laurels  or  come  to  this 
queenly  city  for  hints  as  to  how  to  tickle  and  conciliate 
the  inner  man. 

Yet  the  excellence  of  the  dinner,  though  so  palpa- 

i.  An  address  before  the  merchants  and  manufacturers  of  Detroit, 
Mich.,  April  18, 1901. 


1 


ble,  is  surely  not  the  chief  cause  of  satisfaction  on  this 
occasion. 

Another  most  potent  element  of  pleasure  to  the 
patriotic  American  is  what  this  assemblage  teaches  con- 
cerning the  activity  and  strength  of  the  commercial 
bodies  of  your  city.  It  shows  that  you  can  get  to- 
gether and  do  big  things  in  a large  way.  It  shows  that 
you  who  live  on  this  magnificent  plateau,  inhabiting  a 
city  that  has  all  the  natural  beauties  of  an  ancient 
Capua  or  modern  Naples,  are  not  asleep,  are  not  becom- 
ing enervated  by  the  very  prodigality  of  nature,  but 
that,  while  not  forgetting  the  things  which  are  behind, 
you  are  stretching  out  to  those  that  are  before,  seek- 
ing to  improve  and  perfect  all  those  possessions  which 
may  promote  the  real  prosperity  and  growth  of  a 
municipality. 

These  things,  however,  are  not  what  most  impresses 
me. 

THE  SIGNIFICANCE  OF  BUSINESS  MEN"S  ORGANIZATIONS. 

The  significant  thing,  to  my  mind,  is  that  the  busi- 
ness men’s  organizations  in  this  center  of  influence 
have  deliberately  set  themselves  to  the  task  of  study- 
ing the  problems  of  taxation,  with  a view  of  ascertain- 
ing, from  a standpoint  neither  of  politics  nor  of  theory, 
but  of  pure  business,  what  is  the  true  method  of  rais- 
ing* the  money  which  must  be  had  for  the  purposes  of 
government. 

It  is  time — high  time — for  all  of  our  cities  to  wake 
up  to  the  prime  importance  of  the  problem. 

It  is  one  of  the  sadly  mysterious  contradictions  of 
American  politics  that  the  vast  mass  of  even  our  intel- 


ligent  voters  have  not  begun  to  realize  that  there  is  a 
problem  in  taxation,  and  that  the  solution  of  it  is — in 
th^  expressive  language  of  the  street — ''up  to’'  thern. 

The  old -darky — whom  Prof.  Wyckofif  tells  of — said, 
when  condoled  with  upon  his  wife’s  death,  "Yes,  suh ! 
But  I is  resigned.  For  I know  very  well,  suh,  that  we 
all  are  in  the  hands  of  an  almighty  and  puffickly  un- 
scrupulous Providence.”  So  the  average  taxpayer 
pays  his  bills  with  resignation,  comforting  himself 
with  the  reflection  that  he  and  all  his  neighbors  are 
"in  the  hands  of  an  almighty  and  puflickly  unscrupu- 
lous” boss.  He  never  thinks  that — even  if  he  cannot 
get  rid  of  his  boss — the  boss  is  as  much  interested  in 
introducing  the  best  scheme  of  taxation  as  he  himself 
can  be,  for  the  bigger  the  goose,  the  better  the  picking. 

I feel  that  I cannot  too  much  emphasize  the  im- 
portance of  the  fact  that  Detroit  is  beginning  to  realize 
that  in  the  question,  "What  is  the  proper  method  of 
raising  taxes?”  we  have  a problem  pressing  upon  us 
for  an  answer,  and  that  it  is  a problem  as  important 
as  any  that  can  confront  us  in  our  civil  life. 

TAXES  TAKE  ONE-HALF  OF  THE  ANNUAL  RETURN  ON 
CAPITAL. 

Do  even  you  realize  how  important  the  problem  is? 

Do  you  realize  that,  in  this  free  government,  which 
boasts  of  its  small  standing  army  and  its  freedom 
from  the  burden  of  a royal  family  and  large  civic  pen- 
sion list,  you  actually  pay  every  year  about  one-half  of 
the  total  annual  value  of  your  accumulated  wealth  for 
the  privilege  of  living  here  ? 


3 


This  is,  I think,  the  fact,  both  startling  and  sober- 
ing. In  the  average  city  of  this  country  the  municipal, 
county  and  state  taxes  amount  to  about  $20  on  the 
$1,000  of  accumulation. 

Is  not  that  pretty  nearly  the  Detroit  figure,  if  to  the 
15.40  “city  tax”  you  add  w'hat  the  state  collects? 

To  that  must  be  added  the  federal  tax. 

Of  course,  there  are  some  protectionists  who  be- 
lieve that  the  foreigner  pays  all  the  custom  duties. 

On  the  other  hand,  there  are  free  traders  who  assert 
that  the  amount  actually  paid  on  imports  represents 
but  a small  part  of  what  we  pay  to  the  government  and 
the  protected  industries  combined. 

Let  us  avoid  the  extremes  and  assume  that  the 
amount  yearly  spent  by  the  federal  government  meas- 
ures, roughly  speaking,  what  is  paid  into  the  treasury 
by  our  own  citizens.  Our  national  expenditures  ap- 
proximate $750,000,000  yearly.  Our  national  wealth 
approximates  $75,000,000,000. 

In  other  words,  the  national  government  calls  an- 
nually for  a sum  equal  to  $10  on  every  thousand  dol- 
lars of  accumulations. 

If,  then,  we  assume  that  you  pay  your  average  pro- 
portion of  federal  taxes,  you  must  add  to  the  $20  per 
1,000  required  by  state  and  city,  $10  per  1,000  re- 
quired by  the  nation,  and  you  will  obtain  as  a result  the 
fact  that  every  year  our  government  requires  from  us 
3 per  cent  of  the  total  value  of  our  accumulated  wealth, 
and  if  6 per  cent  annually  is  a fair  return  upon  capi- 
tal, the  conclusion  is  inevitable  that  government  takes 
one-half. 


4 


Even  now  we  have  not  taken  into  consideration  the 
franchise  taxes,  licenses  and  other  indirect  imposi- 
tions of  that  nature  for  the  benefit  of  the  local  govern- 
ment, which  are  advanced  by  corporations  and  indi- 
viduals, to  be  repaid  to  them  by  their  customers,  nor 
the  sums  collected  as  taxes  on  sundry  bits  of  paper  like 
mortgages,  notes  and  bonds,  which  merely  represent 
property,  already  once  taxed,  and  the  taxes  upon 
which  are  in  reality  a species  of  double  taxation. 

Some  of  you  may  question  whether  all  of  those 
items  should  be  included.  All  of  you  would  include 
some  of  them,  and,  bearing  these  in  mind  and  remem- 
bering that  we  have  $30  per  $1,000  to  pay  without 
considering  them,  is  it  not  clear  that  I do  not  over- 
state— even  if  I do  not  understate — when  I say  that 
right  here  in  Detroit  you  are  obliged  to  pay  your  rul- 
ers one-half  the  annual  value  of  your  property  for  the 
privilege  of  being  governed. 

Is  there  need  to  add  anything,  particularly  to  busi- 
ness men,  to  emphasize  the  importance  of  levying 
rightly  this  enormous  tribute. 

Through  all  history  taxation  has  been  a crisis-caus- 
ing question.  No  other  subject  has  so  quickly  and  so 
frequently  stirred  the  Anglo-Saxon  blood. 

“Backward  look  across  the  ages  and  that  beacon  mo- 
ment see,”  when  one  Englishman,  standing  firm 
against  tyrannical  king  and  corrupted  court,  defied 
them  both  in  defense  of  that  deathless  spark  of  free- 
dom which  has  flamed  forth  into  English  liberty  as 
the  world  knows  it  to-day. 

The  inciting  cause  of  John  Hampden’s  action  was 


5 


simply  opposition  to  the  manner  in  which  a tax  was  im- 
posed. 

A century  and  a half  from  Hampden’s  time  Wash- 
ington was  camped  at  Valley  Forge. 

See  those  few  heroes  starving  and  freezing  in 
desperate  but  never  despairing  rebellion  against  the 
mighty  empire  whose  power  girdled  the  globe. 

These  sufferings  of  our  forefathers,  their  ultimate 
triumph,  and  our  wonderful  present  country  would 
not  have  been,  except  that  those  who  went  before  us 
risked  their  all — life,  property  and  reputation — rather 
than  submit  to  a system  of  taxation,  not  specially  bur- 
densome, but  which  was  unjustly  laid. 

The  tax  problem  of  to-day  is  as  much  a problem  for 
us  as  the  tax  problem  of  other  days  was  a problem  for 
our  ancestors,  and  we  would  be  unworthy  of  the  blood 
in  our  veins  did  we  not  resolutely  face  it. 

I have  said  that  you  approached  this  question,  not 
from  the  standpoint  of  politics  nor  of  theory,  but  of 
business.  By  this  I do  not  mean  that  the  question  can 
ever  be  anything  else  than  ''political,”  using  the  word 
in  its  broad  and  proper  sense. 

Neither  do  I mean  that  there  can  be  any  solution  of 
this  or  any  problem  except  upon  some  theory. 

What  I do  mean  is  that  you  are  not  looking  to  find 
in  the  answer  any  partisan  advantage,  and  that  you 
desire  to  work  the  matter  out  upon  lines  which  appeal 
to  your  own  cool,  hard-headed  business  sense,  rather 
than  to  the  preconceived  notions  of  student  devotees  to 
some  system  of  political  economy. 


6 


THE  PROBLEM  DEFINED. 

First  let  us  define  the  problem.  With  federal  or 
state  taxation  we  will  not  now  concern  ourselves.  Mu- 
nicipal taxation  is  a big  enough  subject  for  us,  at  least 
for  one  evening,  and  after  dinner. 

The  practical  problem  of  municipal  taxation  for  you 
business  men  of  Detroit  is  something  like  this: 

Given  Detroit,  a city  which,  in  the  race  for  popula- 
tion, wealth  and  all  that  makes  for  the  comfort  and 
happiness  of  its  citizens,  is  in  direct  and  strenuous 
competition  with  numerous  other  cities,  and  in  indi- 
rect and  less-felt  competition  with  almost  every  other 
city  in  Europe  and  America. 

Given  the  necessity  to  raise  in  Detroit  a large  sum 
annually,  to  be  collected  from  its  citizens  for  public 
uses,  and  the  same  necessity  existing  in  the  case  of 
every  one  of  its  rivals. 

The  question  is,  '‘How  can  that  sum  be  raised  with 
the  least  interference  with  the  prosperity  of  its  own 
citizens,  and  in  such  manner  as  not  to  handicap  it  in 
the  race  with  its  competitors  Or,  in  plainer,  blunter 
phrase,  "Can  Detroit  so  lay  its  taxes  as  to  induce  capi- 
tal to  come  here  rather  than  go  elsewhere?’' 

If  you  can  induce  capital  to  come,  population  will 
come  with  it.  Indeed,  population  is  a form  of  capital, 
for  every  able-bodied  citizen  brings  a kind  of  wealth 
in  his  arms  and  brain. 

When  the  question  is  so  put  the  general  answer  is 
easy : "If  you  want  to  attract  capital  offer  it  an  in- 

ducement,” 


■ i 


.7 


I have  already  said  that  every  able-bodied  man,  no 
matter  how  poor,  brings  some  capital  in  his  arms  and 
brain. 

For  that  reason,  every  city  wishes  to  increase  its 
population  of  able-bodied  men. 

Suppose  that  it  were  the  custom  in  most  of  our  cities 
to  charge  every  new  citizen  a poll  tax  of,  say,  $2,  be- 
fore he  would  be  allowed  to  locate. 

Can  you  not  see  what  a wide-awake  municipality 
would  do  ? 

It  would  promptly  abolish  this  poll  tax. 

But  while  any  able-bodied  man  adds  something  to 
the  wealth  of  a city,  an  able-bodied  man,  with  money 
capital  beside,  surely  adds  more.  And  he  adds  most 
who  comes  into  the  community  with  capital  to  build  a 
manufactory. 

For  a new  manufacturing  interest  brings  with  it  both 
wealth  and  population.  Its  effect  is  not  limited  to  the 
sum  first  spent  in  its  establishment. 

Every  year  there  must  be  paid  out  in  wages  a large 
sum,  perhaps  larger  than  the  original  investment, 
while  the  city  becomes  a market  for  the  raw  material 
and  a depot  for  the  finished  product,  the  beneficial  ef- 
fects of  which  upon  its  general  business  are  hard  to 
calculate. 

In  short,  while  every  able-bodied  man  is  desirable, 
every  capitalist  is  more  desirable,  and  a manufacturing 
enterprise  is  most  desirable  of  all. 

Yet,  strange  to  say,  although  a poll  tax  levied  by  a 
city  upon  new  residents  seems  so  absurd  as  to  be  al- 
most inconceivable,  we  actually  find  most  cities  saying 

8 


to  the  incoming  manufacturer,  “You  shall  not  locate 
your  factory  within  our  limits  unless  you  pay  to  us 
in  taxes  2 per  cent  of  the  value  of  the  plant  which  you 
place  among  ns” 

Here,  then,  a wide-awake  city  has  an  opportunity. 
Just  as  in  the  hypothetical  case,  it  would  be  the  policy 
of  a progressive  municipality  to  abate  the  poll  tax, 
so  in  the  actual  case  it  is  the  policy  of  a progressive 
municipality  to  abate  the  incoming  manufacturer's  tax. 
Welcome  him! 

Tell  him  “In  this  city  at  least  you  need  not  pay 
taxes  upon  the  plant  and  machinery  that  you  add  to 
our  city’s  wealth.” 

This  is  no  wild  cat  scheme.  It  is  in  operation  in 
some  of  the  most  conservative  and  solid  cities  in  this 
country. 

There  have  been  towns  so  impressed  with  the  advan- 
tages of  securing  manufacturers  tliat  they  have  paid 
out  bonuses  to  incoming  corporations,  have  given  them 
land,  and  have  almost  gone  into  a state  of  hysteria 
in  their  efforts  to  induce  manufacturers  to  come  to 
them. 

Wild  cat  schemes,  founded  on  some  really  valuable 
principle  when  properly  applied,  are  numerous — so 
numerous  that  it  is  no  wonder  that  Mrs.  Innocent,  in 
the  newspaper  squib,  when  told  by  her  husband  that 
a friend  has  lost  his  fortune  in  some  wild  cat  mines, 
opened  her  blue  eyes  in  astonishment  and  said,  “Well ! 

I never  knew  before  that  they  had  to  mine  for  wild 
cats.” 

This  idea  does  not  belong  to  that  genus. 


i) 


PRACTICAL  BENEFITS  FROM  EXEMPTING  MANUFACTUR- 
ING PLANTS  FROM' MUNICIPAL  TAXATION. 

My  reason  for  being  with  you  tonight  is  because 
in  my  own  city  of  Baltimore  we  have  had,  since  i88i, 
an  ordinance  exempting  manufacturers’  plants  from 
municipal  taxation,  and  I can  speak  of  its  practical 
workings  during  a period  of  twenty  years. 

We  have  in  Maryland  a constitution  which,  so  far 
as  taxation  is  concerned,  is,  in  the  opinion  of  some 
of  us,  an  antiquated  and  obsolete  document,  and  ac- 
cording to  the  construction  given  it  by  our  courts, 
would  absolutely  prohibit  such  an  ordinance. 

Perhaps,  therefore,  the  best  thing  I can  say  of  the 
ordinance  is  that  although  it  is  clearly  unconstitutional ; 
although  we  have  many  taxpayers  and  officials  in 
Maryland  who  are  desirous  of  adding  to  the  assess- 
ment every  possible  cent;  although  there  was  inti- 
mation of  its  unconstitutionality  gratuitously  thrown 
out  by  our  Court  of  Appeals  seventeen  years  ago, 
and  an  actual  decision  five  years  ago  by  the  Chief 
Judge  of  our  Court  of  Appeals  upon  circuit,  that  a 
similar  act  for  the  city  of  Frederick  was  unconsti- 
tutional; in  spite  of  all  this,  there  has,  until  now, 
been  found  no  one  brave  enough  to  face  the  wrath  of 
the  community  by  bringing  a test  case  against  it  and 
striking  it  down;  while  almost  every  session  of  the 
Legislature  extends  similar  unconstitutional  provision! 
to  the  smaller  towns  and  counties  of  our  State.  Six 
of  such  local  laws,  condemned  by  the  constitution 
but  approved  by  experience,  are  to  be  found  in  the 

10  . ..  i 


acts  of  our  General  Assembly  at  its  last  session  of 
1900. 

When  the  Frederick  exemption  was  decided  in  the 
lower  court  to  be  unconstitutional,  the  commercial  or- 
ganizations of  Baltimore  w'ere  aroused  to  defend  our 
statute  and  ordinance.  The  Merchants’  and  Manu- 
facturers’ Association  procured  their  counsel  to  inter- 
vene in  the  case  and  urge  the  Court  of  Appeals  not 
to  declare  void  the  law  which — as  they  said — “had 
stood  unquestioned  for  more  than  sixteen  years,  and 
m that  time  has  had  an  immense  inlluence  in  the 
growth  and  development  of  Baltimore  City.” 

The  same  counsel,  speaking  of  the  effects  of  this 
ordinance,  use  language  which  I see  has  already  been 
brought  to  your  attention  by  your  progressive  citi- 
zen, Mr.  Ingram,  as  follows: 

“Under  the  act  of  1880  the  Mayor  and  City  Council 

Baltimore  passed  an  ordinance  in  February,  1881 
(Balto.  City  Code,  p.  1,052,  Art.  50,  Sec.  71)’,  pro- 
viding for  the  abatement  of  municipal  taxes  on  all 
manufacturers’  plants.  In  the  opinion  of  those  who 
have  carefully  examined  the  question  the  impetus 
given  to  the  establishment  and  extension  of  manufac- 
turing industries  in  our  city  has  far  exceeded  in  value 
the  taxes  which  have  been  abated. 

“In  some  lines  Baltimore  now  ranks  among  the  lead- 
ing manufacturing  centers  of  the  country,  and  this 
IS  mainly  the  result  of  the  growth  of  the  last  fifteen 
or  sixteen  years. 

“Employment  has  been  furnished  to  thousands  of 
our  citizens  and  it  would  be  difficult  to  estimate  the 


II 


addition  either  to  the  number  of  the  inhabitants  or 
to  the  amount  of  taxable  basis  directly  due  to  the 
development  of  manufactures.” 

Bear  in  mind  that  these  gentlemen  were  pleading  on 
behalf  of  an  ordinance  which  had  been  tested  for  six- 
teen years,  and  that  they  were  speaking  for  the  organi- 
zation which  is  representative  of  Baltimore  in  the 
same  way  as  your  organizations  collectively  are  rep- 
resentative of  Detroit,  and  you  will  then  realize  the 
strength  of  the  indorsement  of  the  law ; not  as  a mere 
theory,  but  as  an  actual  reality  in  full  operation. 

The  Court  of  Appeals,  as  matter  of  fact,  seemed 
to  yield  to  the  argument,  and,  deciding  the  case  on 
another  point,  expressly  refrained  from  passing  upon 
the  constitutionality  of  the  law. 

Not  long  ago  I had  the  pleasure  of  talking  about 
this  subject  with  Hon.  F.  C.  Latrobe,  who  was  mayor 
when  the  ordinance  was  passed.  He  referred  to  it 
as  one  of  the  results  of  his  administration  in  which  he 
took  most  pride. 

He  acknowledged  its  doubtful  constitutionality,  but 
said  that  he  had  never  heard  any  serious  complaint. 

“There  have  been,”  he  said  in  effect,  “one  or  two 
motions  toward  attacking  it,  but  there  was  immedi- 
ately stirred  up  such  a storm  of  protest  that  the  at- 
tempt  died  still  born/^ 

-I  have  made  it  a point  to  talk  with  several  manu- 
facturers upon  the  subject,  and  all  of  them,  large  and 
small,  agree  that  the  repeal  of  the  ordinance  would  be 

disastrous  to  our  city.  _ r t,  • 

One  of  the  most  convincing  illustrations  of  how  it 

12 


works  was  given  in  a conversation  the  other  day  with 
a comparatively  small  manufacturer. 

'‘Unless  it  had  been  in  existence/'  he  said,  "I  would 
not  have  bought  my  new  machinery.  The  margin 
of  profit  is  so  small,  the  sinking  of  money  invested  in 
plant  is  so  sure,  and  the  chances  of  failure  are  so  many, 
that  the  absence  of  tax  was  the  determining  consider- 
ation that  led  me  to  enlarge  and  modernize  my  estab- 
lishment." 

GROWING  INDUSTRIES. 

The  census  furnishes  very  interesting  figures  in  this 
connection.  Owing  to  various  causes  Baltimore  has 
seen  its  once  magnificent  sugar  refining  industry 
sucked  away  from  it  by  "The  Trust."  It  has  seen 
the  great  shops  of  the  Baltimore  and  Ohio  Railroad 
practically  moved  away,  while  its  former  largest  iron 
foundry  plants  have  been  dismantled  and  broken  up 
into  building  lots.  And  these  are  only  a few  of  its 
losses. 

Many  of  the  large  manufacturing  establishments 
which  naturally  belong  to  our  city  are  located  in  the 
suburbs  beyond  the  city  limits. 

Yet  in  spite  of  these  setbacks — practically  all  of 
which  occurred  before  i8qo — our  manufacturing  in- 
dustries have  shown  surprising  development.  It  is 
unfortunate  that  the  figures  taken  for  the  census  of 
last  year  are  not  accessible,  for  accurate  data  are  no- 
where else  to  be  obtained. 

I spent  a day  in  trying  to  induce  the  census  officials 
to  advance  Baltimore  upon  the  list  so  that  I could 


13 


present  you  with  fresh  statistics  to-ni|:^ht,  but  it  is 
impossible  to  ol^tain  them  for  several  months.  We 
must  therefore  fall  back  upon  a comparison  of  1880 
and  1890. 

It  would  seem  to  me,  however,  that,  in  any  event, 
this  comparison  will  really  be  more  valuable,  inas- 
much as  this  period  practically  covers  the  first  ten 
years  of  the  actual  working  of  our  ordinance,  and  its 
effect  would  be  likely  to  be  then  more  marked,  than 
afterward.  Furthermore,  our  city  was  among  the 
first  to  try  the  effects  of  such  legislation.  Since  that 
time  so  many  neighboring  towns  and  cities  have 
granted  the  same  exemption  that,  on  the  authority  of 
Mr.  Richard  H.  Edmonds,  editor  of  The  Manufac- 
turer’s Record,  I may  say  that  there  is  almost  none  of 
the  smaller  cities  in  our  region  but  now  offers  this 
inducement  to  manufacturers. 

Taking,  then,  the  figures  of  the  census  reports  which 
are  accessible,  and  for  the  reasons  stated  are  most  val- 
uable, we  find  that  in  1880  there  were  in  Baltimore 
3,680  manufacturing  establishments. 

In  1890  there  were  5,265,  an  increase  of  43  per  cent 
in  ten  years. 

In  1880  there  were  $38,581,873  capital  invested  in 
these  manufactories.  In  1890  there  was  invested  $92,- 
723,677,  an  increase  of  more  than  140  per  cent. 

In  the  same  period  the  wages  paid  increased  from 
$15,113,489  to  $35,914,854,  or  137  per  cent,  while  the 
product  ran  up  from  $78,397,064  in  1880  to  $141,723,- 
599  in  1890,  or  more  than  80  per  cent. 

In  1883  the  assessed  value  of  the  plant  so  exempted 
was  $2,890,432. 


14 


In  1893  it  was  $4,074,824,  an  increase  of  41  per  cent. 

In  1890  the  assessment  was  5,593,270,  an  increase 
over  1883  more  than  93  per  cent. 

W^hile  these  figures  are  gratifying,  they  are  not  sat- 
isfying. \\e  do  not  have  in  Baltimore  the  legislation 
which  we  ought  to  have.  Philadelphia  has  more  lib- 
eral tax  laws  than  ours,  and  I have  no  doubt  there 
are  other  cities  as  advanced  as  Philadelphia.  :\Iore- 
over,  I do  not  think  that  our  ordinance  is  upon  a suffi- 
ciently secure  and  permanent  basis  to  be  able  to  show 
the  results  that  such  an  ordinance  would  give  were 
it  undoubtedly  constitutional. 

I know  that  we  have  had  judges  of  our  Appeal  Tax 
Court  who  have  been  unfriendly  to  its  principle  and, 
although  not  caring  or  not  daring  to  strike  it  down, 
have  by  construction  hampered  its  operations  and  im- 
peded its  usefulness. 

I know  that  concerns  not  contemplated  at  all  as 
within  its  purview,  like  gas  and  electric  companies, 
have  sought  an  exemption  under  it  and  have  so 
aroused  prejudice  against  it. 

For  these  reasons  I say  that  the  principle  has  not 
had  in  Baltimore  a fair  test. 

When,  therefore,  one  takes  these  things  into  con- 
sideration, and  then  contemplates  the  increase  of  our 
manufactories,  it  seems  to  me  that  the  result  is  simply 
startling  and  shows  what  a good  principle  will  do 
even  when  falteringly  and  imperfectly  applied. 

MUNICIPAL  COMPETITION  FOR  MANUFACTURING 
PLANTS,  POPULATION,  WEALTH. 

I have  said  that  you  are  in  a race  for  population 


l.j 


i 


and  wealth  with  all  neighboring  cities,  and  indirectly 
with  all  civilized  cities,  and  you  are  in  a race  with 
them  for  manufacturers  as  a prime  factor  in  inducing 
population  and  increasing  wealth. 

In  many  aspects  the  competition  is  so  pronounced 
as  to  make  the  simile  an  apt  one  of  Detroit,  Milwau- 
kee, Cleveland,  Toledo,  Buffalo  and  Toronto  being 
like  business  houses  in  the  same  line  in  the  same 
town — all  competitors  for  the  same  customers — while 
New  York,  Philadelphia,  Chicago,  St.  Louis  and  Kan- 
sas City  are  like  houses  dealing  in  the  same  goods 
in  other  cities.  Why  not  frankly  recognize  the  fact 
and  apply  as  citizens  to  this  municipal  rivalry  the 
same  principles  which,  as  merchants,  enable  you  to 
hold  your  own  with  your  business  competitors? 

The ’way  in  which  some  cities  handle  the  tax  ques- 
tion in  this  competition  seems  to  me.  so  grotesque  as 
to  be  absurd,  and  yet  so  intrenched  in  ancient  preju- 
dices and  conservatism  that  its  absurdity  does  not 
appear  to  many  people  by  simple  statement. 

I have  therefore  yielded  to  a whimsical  mood  and 
endeavored  to  represent  a mercantile  house  as  doing 
in  its  competition  what  certain  cities  are  doing  in  theirs. 

Here  would  be  its  sign : 

“THE  HONEST  BARGAIN  HOUSE. 

“no  favoritism. 

“No  customer  is  allowed  to  enter  this  store  until  he 
has  contributed  his  proportion  toward  paying  the  rent, 
clerk  hire  and  other  expenses  of  the  establishment. 

“Old  Fogy  & Co.” 


The  real  sign  in  a live  establishment  is  of  course 
the  exact  opposite  of  this: 

^‘LOWEST  CASH  PRICES. 

""no  trouble  to  show  goods. 

""Progress  & Co." 

Can  you  conceive  a customer  entering  the  house  of 
""Old  Fogy  & Co."  unless  he  were  compelled  to  by  a 
policeman  or  a shotgun?  Can  you  conceive  even  ""Old 
Fogy  & Co."  putting  up  such  a sign  unless  each  indi- 
vidual partner  had  gone  stark  crazy? 

Nevertheless  the  invitation  to  capital  held  out  by 
many  cities  is  exactly  the  invitation,  mutatis  mutan- 
dis, held  out  by  ""Old  Fogy  & Co."  to  their  customers. 

When  any  city  in  this  country  thoroughly  and  en- 
thusiastically adopts  the  spirit  of  ""Progress  & Co.’s" 
sign,  which  is  nothing  but  the  spirit  of  a sensible  busi- 
ness man  in  his  own  business,  there  will  be  an  awak- 
ening of  the  dry  bones  that  would  astonish  Ezekiel 
the  prophet. 

This  is  the  kind  of  spirit  that  I hope  may  soon  dom- 
inate the  tax  laws  of  both  Baltimore  and  Detroit,  and 
lead  both  cities  to  extend  a cordial  invitation  and  wel- 
come to  capital  and  labor. 

IN  FAVOR  OF  ABOLISHING  THE  TAXATION  OF  PERSONAL 
PROPERTY. 

For  to  my  mind  the  manufacturer  is  not  the  only 
one  whom  our  tax  laws  ought  to  favor. 

The  merchant,  the  laborer,  the  farmer,  the  profes- 
sional man,  the  student,  the  capitalist — even  the  law- 


17 


yer — all  sorts  and  conditions  of  men,  are  worthy  of 
consideration  when  we  lay  our  taxes. 

Personally  I am  much  impressed  with  the  argument 
made  for  the  total  abolition  of  all  taxes  on  personal 
property  and  on  improvements  to  land. 

The  argument  is  that  such  exemptions,  while  di- 
rectly benefiting  the  owners  of  personal  property  and 
improvements,  indirectly  but  no  less  surely  benefit  the 
owner  of  the  land. 

The  advocates  of  this  argument  say,  ‘‘Suppose  I 
have  a hundred-acre  farm  in  the  center  of  a poor  and 
sparsely  inhabited  district  worth  $io  per  acre,  upon 
which  I pay  an  annual  tax  of  $20,  and  from  which  I 
get  a revenue  of  nothing  per  year.  My  net  annual 
loss  on  that  farm  is  $20  beside  interest.  Suppose 
capital  and  population  come  to  that  vicinity  and  I rent 
my  farm  for  $600  annually,  even  although  my  tax 
bill  were  multiplied  ten  times  to  $200.  My  net  annual 
income  is  $400.  In  other  words  my  taxes  have  in- 
creased 1,000  per  cent  yet  my  net  annual  return  from 
my  land  has  changed  from  a deficit  of  $20  to  an  in- 
come of  $400. 

Again,  suppose  that  I own  a city  warehouse  rented 
to  a merchant  for  $1,000  per  year  and  pay  taxes  of 
$300  annually.  Suppose  by  legislation,  designed  to  tax 
the  merchant’s  stock,  my  taxes  are  reduced  one-half 
to  $150  per  year,  but  one-fourth  of  the  merchants 
close  their  stores  on  this  account,  and,  to  prevent  the 
loss  of  my  tenant,  I reduce  the  rent  of  my  premises 
one-fourth,  or  $250.  I am  just  $100  worse  oflf  than 
I was  before,  and  this  by  reason  of  legislation  that 
reduced  my  taxes. 


18 


Again,  suppose  that  I own  a block  of  vacant  land 
worth  $10,000,  but  from  which  I derive  no  revenue 
at  all,  and  suppose  the  taxes  are  levied  upon  merchants, 
manufacturers  and  others  and  I am  only  called  upon 
to  pay  $50  per  year  in  taxes.  But  suppose  the  result 
is  that  merchants,  manufacturers  and  others  do  not 
thrive  in  my  city,  there  is  no  demand  for  new  build- 
ings, and  I cannot  sell  my  land  except  at  too  gretit 
a sacrifice,  and  therefore  hold  it.  I lose  the  interest 
on  my  money  and  the  taxes  beside,  say  $55^  per  year. 

Now  suppose,  on  the  contrary,  that  the  tax  is  re- 
moved from  personal  property  and  improvements,  so 
that  my  tax  is  trebled  to  $150  per  year. 

If  thereby  a demand  is  created  for  my  lot  and  I am 
enabled  to  sell  it  for  $11,000,  does  not  the  Legislature, 
although  increasing  my  tax,  benefit  me — the  holder  of 
vacant  ground — even  more  than  it  benefits  the  parties 
exempted.  In  short,  the  whole  thought  of  the  sub- 
ject is  condensed  in  the  best  possible  way  in  this  sen- 
tence of  Mr.  Ingram’s:  ''Real  estate  is  not  benefited 
by  a low  tax  rate,  if  the  rental  value  or  selling  value 
is  lessened  thereby.”  And  it  may  well  be  true  that  any 
tax  on  personal  property  or  improvements  lessens  the 
rental  and  selling  value  of  real  estate  more  than  it 
reduces  the  tax  thereon. 

The  inherent  justice  or  fairness  of  such  exemptions 
at  first  blush  seems  open  to  question,  because  we  have 
all  been  more  or  less  under  the  spell  of  the  phrase 
that  "every  man  ought  to  pay  taxes  according  to  his 
actual  worth  in  real  and  personal  property.” 

But  to  my  mind  this  proves,  on  examination,  to  be 


19 


-ii 

■ 

■'  ;i 


a fallacy.  It  is  a good  rule  when  it  comes  to  contrib- 
uting to  a charity,  but  a bad  rule  when  it  comes  to 
payment  for  value  received. 

If  in  a street  car  full  of  passengers  a collection  is 
taken  for  a poor  child  who  has  been  injured  by  the 
car,  it  is  right  that  the  passengers  should  contribute 
according  to  their  actual  worth  in  property.  But 
when  it  comes  to  paying  the  conductor  for  their  ride 
down  town  the  idea  of  charging  passengers  different 
rates  according  to  their  assets  becomes  preposterous. 

TAXES  PAYMENTS  FOR  BENEFITS. 

I like  to  think  of  taxes,  not  as  contributions  to,  or 
exactions  by,  the  government,  but  as  payment  to  the 
government  by  those  benefited  for  what  the  govern- 
ment gives  them. 

In  a way  every  one  shares  the  benefits  of  a good 
government,  but  in  a pecuniary  way  those  benefits  inure 
mainly,  if  not  wholly,  to  the  owner  of  land. 

Take  the  case  of  improved  pavement  on  the  street. 
All  the  property  along  that  street  goes  up  about  equally 
per  front  foot,  without  any  reference  to  the  improve- 
ments upon  it,  and  without  reference  to  the  personal 
property  within  the  improvements. 

If  a fine  school  is  erected  in  the  immediate  neigh- 
borhood the  same  thing  is  true.  It  is  the  man  who 
owns  land  in  the  neighborhood  who  gets  pecuniary  ben- 
efit. The  man  whose  children  attend  the  school  of 
course  saves  tuition,  but  the  landowner  has  the  value 
of  his  assets  permanently  increased. 

I have  merely  outlined  the  argument  in  one  aspect 


20 


of  it.  There  is  also  a moral,  altruistic  or  Christian 
side  to  it  which  I will  not  touch  upon.  This  is  the 
economic  side  only.  Is  it  not  worthy  of  consideration  ? 
Does  it  not  behoove  the  ‘^solid  men’’  of  a city  to  thor- 
oughly investigate  its  claims,  so  as  to  pronounce  it, 
after  fair  investigation,  valid  or  invalid? 

EXHORTATION  TO  ACTION. 

But  this  broad  question  is  not  my  particular  sub- 
ject; although,  when  I accepted  your  invitation  to 
speak,  it  was  with  the  understanding  that  I was  to 
have  the  liberty  of  an  exhorter,  and  not  to  be  confined 
to  the  province  of  a preacher. 

“The  difference  batween  a preacher  and  a ’xorter,” 
says  Uncle  ’Rastus,  “is  this.  A preacher — he  has  got 
to  stick  to  his  text ; but  a ’xorter — he  kin  branch/' 

I have  “branched”  and  am  something  like  the  par- 
son of  whom  it  was  said,  “If  his  texts  had  the  small- 
pox, his  sermons  would  not  catch  it.” 

Recurring  for  a moment  to  my  text,  I will  conclude 
by  saying  that  the  Baltimore  ordinance  exempting 
manufacturers’  plant — although  applied  under  most 
unfavorable  conditions — has  apparently  benefited  our 
city  to  a remarkable  degree. 

It  is  not  a radical  measure,  nor  does  it  require  an 
adoption  to  its  full  extent,  or  indeed  to  any  extent, 
of  the  principle  in  which  I see  so  much  to  commend. 

Should  you  introduce  a similar  system  here,  I have 
no  doubt  that  nothing  but  good  to  your  city  would,  re- 
sult. I only  hope  that  it  may  be  introduced  here, 
and  that  you  may  gain  such  an  advantage  over  Balti- 


21 


more  by  its  means  that  we  will  be  obliged  to  go  on 
to  adopt  still  more  progressive  measures. 

In  any  event  I will  be  glad  if,  by  any  words  of  mine, 
I have  induced  one  earnest,  practical  man  to  give  more 
serious  attention  than  he  otherwise  would  have  done 
to  the  burning  question,  ^‘How  can  we  distribute  the 
tremendous  burden  of  our  local  taxes  so  as  not  to 
discourage  municipal  progress.’' 

This  is  the  question  of  government. 

Government  is  nothing  but  the  collection  and  ex- 
penditure of  taxes,  and  he  who  in  his  own  neighbor- 
hood contributes  toward  the  solution  of  this  question 
one  mite  of  value  is  a true  patriot  and  deserves  that 
meed  of  praise  to  obtain  which  the  Roman  citizen 
would  gladly  die: 

‘'He  deserves  well  of  his  country.” 


